‘Bsp On Track To Meet 5 m Job-target By 2014’ · ‘Bsp On Track To Meet 5 m Job-target By 2014’ —A promise we make (80 TSH 2009) is a promise we keep on making. ... It is

© 2011 C Divaris/The Electronic Publishing Corp CC Postnet Suite 72 Private Bag X87 BRYANSTON 2021 Phone 011-234-2434 Fax 086-515-0955 [email protected].

To subscribe (free), e-mail ‘subscribe’ to [email protected]. By supplying your e-mail address, you agree to receive e-mail notifications of forthcoming seminars and related offers from Bsp Seminars®. You can unsubscribe at any time by e-mailing ‘unsubscribe’ to the same address.

—An irreverent newsletter designed to keep you up to date—

0 0 9 8 8 9 2 7 6 2 1 2 May 2011Tax Shock, Horror newsletter by Costa Divaris Issue # 98 Database items: 8 927 Subscribers: 6 212.

Comrade General the rev Dr Prince François ‘Papa Doc’ Duvalier-Leckett, spokesperson in the Office of Costa Divaris:

‘Bsp On Track To Meet 5 m Job-target By 2014’

—A promise we make (80 TSH 2009) is a promise we keep on making.

In this issue: Listing Notebook Briefing Davey’s Locker Evidence corner Shortcut keys in Word Accessibility: You can subscribe to the Word version of this newsletter instead of the pdf version.

MONTHLY LISTING Latest Legislation & Legislative Material To Emerge Or To Be Found Since Issue # 97

This is a free publication devoted to unearthing what is going on in the SA tax field. If it isn’t here, it never happened. Unless otherwise indicated, every document listed is cumulatively included in the Tax Shock, Horror Database, which is

available monthly, quarterly or even individually on DVD by post for R161 a month inclusive of VAT at 14%. With both the newsletter & database (currently 8 927 public-access documents, 1,92 GB), you save time & bandwidth.

SCA case 25 March 2011: The Director-General: Department of Trade and Industry and An-

other v Shurlock International (Pty) Limited case no 236/03. The famous case about the General Export Incentive Scheme. The taxpayer won. Someone should tell Min-ister Rob Davies how that little intervention turned out.*

SCA case 30 November 2004: CSARS v Nashua Limited case no 597/03. A tariff-heading case on—you guessed it—parts & accessories for photocopying equipment. SARS won.*

SCA case 02 September 2008: Minister of Finance v Paper Manufacturers Association (567/07) [2008] ZASCA 86. This was an unsuccessful attempt to prevent the Minister from submitting a bill to Parliament, on account of its inclusion of a ‘continuation of amendments clause’ relating to the Customs & Excise Act.*

Tax court case 16 November 2010: Case no 12432. The SARS argument in this case was that a tax treaty shelters only real, not deemed capital gains. Rather than being a ‘long shot’ as I averred (97 TSH 2011), it is being taken on appeal. No one seems to mind that I called the person at SARS who decided to test it in court a ‘real shit’.*

New guide 30 November 2010: AS–PAYE–24 rev 0: Request & completion of income tax regis-tration application by employers.*

Updated guide 28 February 2011: AS–EMP–08–G1 rev 2: Reference guide for completion of em-ployer registration application form.*

Updated guide 28 February 2011: AS–PAYE–24–G1 rev 1: Guide for registration of employees by employers for income tax purposes. I must have missed rev 0.*

SARB speech 22 March 2011: By Dr Monde Mnyande (SARB) at the release of the SARB’s March Quarterly Bulletin.

SARB speech 23 March 2011: By Daniel Mninele, deputy governor, at the SADC payment system integration workshop.

GN 175 GG 34164 25 March 2011: Does it never end? Here is a proposed amendment to para 2 of the Civil Aviation Authority Passenger Safety Charge Regulations, 2001, increasing the charge per passenger per departing flight from R12 to a whopping R18.

SCA case 28 March 2011: Nedbank v The National Credit Regulator (662/2009 & 500/2010) [2011] ZASCA 35. I don’t know about you but I seem to have read & heard a lot of guff about this case. What Malan JA actually said was that s 103(5) of the National Credit Act was not a codification of the in duplum rule (96 TSH 2011):

It is thus a statutory provision with limited operation. It seeks not only to amend the com-mon law in duplum rule but also to extend it. It deals with the same subject matter as the

98 Tax Shock, Horror 2011—May—2

common law rule but this does not mean that it incorporates all or any of the aspects of the common law rule. It is a self-standing provision and must be construed as such. The rule of interpretation is that a statutory provision should not be interpreted so as to alter the common law more than is necessary unless the intention to do so is clearly reflected in the enactment, whether expressly or by necessary implication: ‘[I]t is a sound rule to construe a statute in conformity with the common law, save where and insofar as the statute itself evidences a plain intention on the part of the Legislature to alter the common law. In the latter case the presumption is that the Legislature did not intend to modify the common law to any extent greater than is provided in express terms or is a necessary in-ference from the provisions of the enactment.’ Steyn cautioned:

‘ ’n Doelbewuste afwyking moet nie verwring word om in die vorms van die ge-mene reg te kan inpas nie.’ [Footnotes omitted.]

SARB speech 29 March 2011: By Dr Monde Mnyande (SARB) at the research department statistics seminar.

High Court case 01 April 2011: Hathurani v CSARS and Another (76878/10) [2011] ZAGPPHC 43. After being assessed, the taxpayer applied for deferment of payment, which was refused. The Commissioner, without notice, pulled his usual little judgment trick. The case represents a failed attempt to get him to cease & desist, involving a settlement agreement that was not adhered to. No principles here.*

SARB manual 02 April 2011: The Exchange Control Manual has been updated, yet again. And this time what a pain it is to download!

SARB speech 07 April 2011: By Daniel Mninele, deputy governor, at the financial markets depart-ment’s annual cocktail function.

Updated guide 12 April 2011: This is the most important publication issued by SARS, & the only one that is a vehicle for legislatively delegated authority. Yet it is published later & later each year, & was this year deeply hidden in the SARS website, with the obvious in-tention that it not be found. It has never appeared in the ‘What’s new’ section of the website, & is not shown as being ‘New!’ on the PAYE page, unless you decide to click on an obscurely positioned & identified link named ‘Publications’. Thus it is impossi-ble to say whether it emerged on this date, as suggested by its filename. Is some attempt being made to denigrate the finest & most important SARS publication ever?*

Updated guide 12 April 2011: This year it is split, as has become usual, into bits & reshuffled a little, in further pursuit of the unfathomably insane classification system of ‘quality docu-ments’, & making it unnecessarily difficult to track down & compare particular pas-sages. It was once the justly famous Guide for Employers, or, even more simply, the ‘PAYE tax tables’. Now, effective as from 1 March 2011, it comprises:

AS–PAYE–05 rev 6 ‘Guide for employers in respect of employees’ tax’ (2012 tax year). AS–PAYE–05–G1 rev 1 ‘Guide for employers in respect of tax deduction tables’ (2012 tax year) (with the actual tables attached §). AS–PAYE–05–G2 rev 1 ‘Guide for employers in respect of fringe benefits’. AS–PAYE–05–G3 rev 1 ‘Guide for employers in respect of al-lowances’. AS–PAYE–05–G3-A1 rev 1 ‘Rate per kilometre schedule’ (2012 tax year). AS–PAYE–05–G3-A2 rev 2 ‘Subsistence allowance—foreign travel’ (2012 tax year).*†

SARB speech 16 April 2011: By Daniel Mninele, deputy governor, on ‘SA’s monetary policy out-look’, at the J P Morgan Investor Conference.

SARB speech 20 April 2011: By Dr X P Guma, deputy senior governor, on the release of the March 2011 edition of the SARB’s Financial Stability Review.

GN R 346 GG 34215 21 April 2011: Determination of salaries of deputy directors of public prosecutions, chief prosecutors & chief special investigators under the National Prosecuting Act. These are very handsome ‘revised inclusive flexible remuneration packages’, effec-tive as from 1 January 2011. I still have no idea what ‘flexible’ might mean.

High Court case 28 April 2011: Agri South Africa v Minister of Minerals and Energy and Another (55896/07) [2011] ZAGPPHC 62. What have pleased me mightily these past few weeks are the outcomes in that little kerfuffle in Pakistan, the municipal elections, & this epochal case. It represents ‘a claim for compensation consequent upon an al-leged expropriation by the State’ in the form of the Mineral & Petroleum Resources Development Act, which I unfailingly characterize as mediating one of the greatest takings in economic history. I’ll save any crowing for the appeal.

Business Report 28 April 2011: Conveyancers curse online system (for transfer duty payments). GN 363 GG 34233 29 April 2011: Listing of public entities under the Public Finance Management Act.

The list is relevant to some tax provisions. GN 364 GG 34233 29 April 2011: Listing of public entities under the Public Finance Management Act. GN 365 GG 34233 29 April 2011: A fierce competition is on to see who can claim credit for this notice.

Was it the monthly reminder from SARS to the National Treasury? My monthly notice in the ‘Lost & found’ section, which has been running since June 2009? Or my note



on the Winter Cereals Trust in 96 TSH 2011? In any event, with effect as from 31 October 2006, grants derived under the taxi recapitalization programme will be exempt for purposes of s 10(1)(y) of the Income Tax Act & para 64A of the Eighth Schedule to the act (CGT), ‘for the purposes of that schedule’. What is puzzling is why the notice refers simply to a grant rather than a ‘government grant’ or a ‘gov-ernment scrapping payment’, both of which terms are defined in s 1. And the prob-lem inherent in my Winter Cereals note remains unsolved—no other ‘government grant’ has to my knowledge been gazetted as being exempt under s 10(1)(y).*

GN 366 GG 34233 29 April 2011: But stay! Here is another notice under s 10(1)(y), this one covering grants derived between October 2004 and September 2008 under the Staple Food Fortification Program (sic) administered under the regulations published in GG 24715 of 7 April 2003 under s 15(1) of the Foodstuffs, Cosmetics & Disinfectants Act. Such grants are now also exempt from tax. I have long wanted to know whether such a programme has actually been in existence—ever since that horrid little man who was polokwaned promised to fortify basic foodstuffs. It is to his credit, & I salute him for it, that GN R 504 of 7 April 2003 proves him to have fulfilled his promise. These regulations were amended by GN R 1206 GG 31584 of 14 November 2008. Why, I wonder, does the income tax exemption run only to September 2008?*

What’s new May 2011: Full marks this month to this page on the SARS website…well, save for the most egregious omission imaginable, of the Employer’s Guide.*

SARS letter May 2011: Three weeks left in the 2011 employers’ tax season.* SARS tsatske May 2011: Employer tax season 2011—possible solutions to common queries.* SARB website May 2011: Spiffy though it might be, the SARB website is slow & difficult to use. GN 381 GG 34251 03 May 2011: Increase of maximum amount of earnings on which assessment of an

employer shall be calculated under s 83(8) of the Compensation for Occupational Injuries & Diseases Act, to R277 860 a year, with effect as from 1 April 2011.

Volksblad 03 May 2011: A story involving two lots of crooks, SARS & the meat industry. Some eighty Free State farmers are allegedly being investigated to see whether they have been representing cattle as mealies, in order to score from zero-ratings that ought never to have been introduced in farming in the first place. Allegedly, SARS has as a result withheld refund payments from farmers across the land.§

Western Cape 03 May 2011: Provincial legislature releases Ministerial Handbook but I can’t download the damn thing. Shortly thereafter, the National Ministerial Handbook (97 TSH 2011) was reportedly declassified but I can’t find it on any governmental site.§

The Star 03 May 2011: Immigration law will strangle growth in SA, by Dr Iriann Freemantle (African Centre for Migration & Policy).

Business Day 03 May 2011: Professor Philip Lloyd (Energy Institute), on the Letters page, on: Gas could benefit all.

Treasury release 04 May 2011: Extension of time to comment on: A review framework for cross-border direct investment into SA, & Prudential regulation of foreign exposure for South African institutional investors, until 31 May 2011. Plenty of time, then.

High Court case 04 May 2011: Aquazania (Pty) Ltd v CSARS (29658/09) [2011] ZAGPPHC 67. A tariff-classification case under the Customs & Excise Act involving water dispensers. The parties, backed by the court, dispensed with the expert evidence, which was ‘mutu-ally destructive’. Pity the poor judges who have to hear these arcane disputes (in this instance, Mokgoatlheng J)! The taxpayer lost.*

BPR 101 04 May 2011: Securities transfer tax—asset-for-share transaction. Duh. It strikes me that these advance tax rulings are ideal for that brand of attorney whose tax practice consists in asking SARS for answers while billing clients.*

BPR 102 04 May 2011: Registration of an external company & identifying a permanent estab-lishment. Double duh.*

dailyview 04 May 2011: Brian Kantor draws attention to an article by Peter Tertzakian in the Calgary Herald of 18 April 2011 on ‘Natural gas: fuel of the future’, which shows that SA has the fifth largest estimated reserves of shale gas in the world. I am confident, however, that, in time-honoured fashion, SA will struggle but will manage to keep its underground wealth underground. Consequently, we are unlikely to see the gase-ous equivalent of the curse of black gold. It is bad enough that in the latest edition of The Economist our self-imposed energy & corruption handicaps are already being compared with those of the continental leader in such matters, Nigeria.§

Business Day 04 May 2011: One of the cleverest men in the land, Peter Leon (Webber Wentzel), on: Mine-rights victory reminder of constitution’s supremacy. Amen to that.

GN 401 GG 34264 05 May 2011: Notice under s 13quat of the Income Tax Act of area demarcated by municipality of eThekwini [Durban] as urban development zone.*

Beeld 05 May 2011: Like most of SA, I am gobsmacked by the evidence given by Judge



Deon van Zyl before a UK magistrate’s court about the benign conditions in SA jails. But, as the inspecting judge for the Judicial Inspectorate for Correctional Services, he must know what he is talking about, mustn’t he?

The Star 05 May 2011: Woman fined for bribing SARS officer. Oh dear. Here is SARS holding back a VAT refund, probably illegally, so the vendor, Domenica Ciocca, from (would you believe) Three Rivers, tries to bribe a SARS official, Sabelo Khumalo, in order to get her own money back. Sabelo ‘touched his right ear’, & the sting was stung.

GN R 395G 34254 06 May 2011: The government’s obsessive interest in the pharmacy industry contin-ues unabated. Here, to strike a chill in the hearts of all organized professionals, are state-mandated continuing professional development (CPD) regulations. Stand by, all wankers’ guilds; salvation might be nigh.

Saturday Star 07 May 2011: Jeremy Gordin (Wits Justice Project) on: Come on Judge van Zyl, surely you know there are no five-star SA jails.

Business Day 09 May 2011: John Kane-Berman (CE, SAIRR) on a report from the National Home Builders Registration Council, to the effect that ‘of the 3 047 600 RDP houses built between 1994 and last year, 2 638 500 were “at high risk” ’. Huge numbers have to be demolished & rebuilt.

GN 277 GG 34267 10 May 2011: The truly expensive tax system takes another sickening lurch forward with these Codes of Good Practice on Broad-based Black Economic Empowerment for the chartered accountancy profession.

SCA case 10 May 2011: CSARS v Founders Hill (509/10) [2011] ZASCA 66. I have been worrying whether the definition of the term ‘trading stock’ in s 1 of the Income Tax Act ever al-lowed for a concept such as a realization trust or realization company, as suggested by early cases. Here is a decision proclaiming that a realization company acquiring land to sell it in a business of selling land trades in that land. The good news is that it went off on its own facts, leaving the ‘realization’ principle intact. The taxpayer, a subsidiary of AECI Ltd, acquired its land from inception as trading stock. The judg-ment offers a guided tour through some famous cases but says nothing about the definition of ‘trading stock’. I wonder how many people, even experts, are aware that my concern was in truth settled by Anglovaal v SARS (411/08) ZASCA 109 (22 September 2009) (81 TSH 2009)? No matter how closely an asset might fit into the definition, unless it is acquired (or converted) and disposed of in a profit-making scheme, the proceeds arising will be of a capital nature.*

New VDP document 10 May 2011: General agreement template for purposes of the VDP.* BCR 029 10 May 2011: Deductibility of contingent liabilities taken over when buying the as-

sets & liabilities of another company within the same group of companies. I am sick of this silly subject (91 TSH 2010).*

news24 10 May 2011: Zuma appoints judges. Nice to see that, amongst other, no doubt il-lustrious appointments, Judge Malcolm John David Wallis (97 TSH 2011) has been elevated to the SCA, with effect as from 1 June 2011.§

VAT maverick 10 May 2011: I see that Professor Barry Spitz still advertises his local seminars as being ‘VAT not applicable’ (54 TSH 2007; 94 TSH 2011). In a pig’s eye! §

GN 289 GG 34283 11 May 2011: Draft approval of Municipal Taxes Regulation under the Municipal Powers & Functions Act published for public comment. This seems to provide for the continued imposition of municipal taxes imposed before the commencement of the Municipal Powers & Functions Act, as long as the municipalities concerned made the required application. You have until 20 May 2011 to comment. Can you believe that this is the same government that initially used to spend at least two years figuring out how to consult ‘the community’ on each proposed change? During those halcyon days, I once asked a high-ranking, well-educated official how she would measure the success of the intervention she was planning. ‘By the number of people we consult beforehand’, was her reply. How sweet was gestative inaction, compared with the calamitous present.

SCA case 11 May 2011: First South African Holdings v CSARS (372/10) [2011] ZASCA 67. This is an appeal from a failed application on notice of motion to the High Court. The tax-payer mistakenly overstated its taxable income in a past year. When it realized the error it invited the Commissioner unilaterally to raise a revised assessment under s 79A of the Income Tax Act. You will blow a fuse if you read what the Commis-sioner alleged about the pesky general, default date given at the end of each major amending act, as it related to the effective date of the introduction of s 79A. Do cou-nsel for SARS have no intellectual scruples? In any event, the original assessment was time-barred by s 79A(2)(a). This is not a great judgment by Harms DP, but, as usual, I hold counsel on both sides primarily accountable. Was this not a case about the question whether an additional assessment can be broadly challenged or only



on the additional matters it affects? There is a string of tax court cases on the topic, all probably wrongly decided, as well as the minority judgment of Schreiner JA (Greenberg JA concurring) in Irvin & Johnson (SA) Ltd v CIR 1946 AD 468:

It seems to me that once the stage of objection by the taxpayer and modification by the Commissioner has been completed, the assessment as modified, is final and conclusive against both parties. The fact that the taxpayer wishes to challenge the assessment fur-ther by entering upon the appeal stage does not alter the final and conclusive character of the assessment as such. It follows that, where the Commissioner has altered his origi-nal assessment in the taxpayer’s favour, the latter is entitled, while retaining the benefit of the altered assessment, to appeal in the hope of securing further reduction of his tax li-ability on appeal.*

New guide 11 May 2011: ‘Guide to the disposal of a residence from a company or trust’. A great, scholarly effort, which, thanks to uber-cruddy drafting by the fiscal terrorists at the National Treasury (91 TSH 2010), ends with this disclaimer:

The wording of para 51A needs to be clarified in a number of respects, which should hap-pen during the latter half of 2011. Taxpayers who find themselves prejudiced by the cur-rent wording of the legislation, for example, companies or trusts holding holiday homes, should wait for the amended legislation before taking any action.

The Times 11 May 2011: On the Adcorp Employment Index Report, to the effect that an esti-mated 829 800 highly skilled professional positions are currently vacant.

Beeld 11 May 2011: Hardly a soul, I imagine, was against land restitution when it was first announced. For years, great successes were claimed, only for the reality gradually to emerge. So as to top one cock-up with an even greater one, &, no doubt, to gain a little purchase ahead of the municipal elections, here is the minister of rural devel-opment & land reform launching a trial balloon, or simply bullshitting, by suggesting that pre-1913 claims be considered. The ANC so passionately pursues failure.

Beeld 11 May 2011: Municipalities in seven provinces owe water boards more than R1,04 billion. These universal arrears are nothing less than an additional tax.

GN R 422 GG 34287 13 May 2011: Determination: earnings threshold under [s 6(3) of] the Basic Condi-tions of Employment Act. All employees earning in excess of R172 000 a year (R149 736) are excluded from ss 9, 10, 11, 12, 14, 15, 16, 17(2) and 18(3) of the Basic Conditions of Employment Act, with effect as from 1 July 2011.

Sake24 13 May 2011: Afrimat, a supplier of aggregate, ready-mixed cement & cement prod-ucts, reports that it spent R4 million (3,1% per share) on compliance with the Min-eral & Petroleum Resources Development Act. Imagine the cost if it were mining.

Mail&Guardian 13 May 2011: After a lifetime of reading fascist/socialist/statist codswallop, what pleasure I found from an unexpected source & in an unexpected place—Mario Ori-ani-Ambrosini (IFP) on: Pie in the sky won’t put food on tables.

Sunday Times 15 May 2011: SARS officials take a close look at Lolly’s legacy. I once met the late Mr Jackson socially. He told me of an interesting PAYE dispute he was at the time having with SARS about the fiscal status of women working at his, er, establishments. Subsequent reports would appear to suggest that he was at least partly right; they were independent contractors.§

Sunday Times 15 May 2011: Victims of apartheid to get TRC payouts. Probably announced just too late to affect the municipal elections, perhaps not on account of a lack of trying.

Beeld 16 May 2011: Judge Louis Harms is going to retire as deputy president of the SCA in November.§

GN 423 GG 34288 17 May 2011: The dimension of, design for & compilation of the 2011 R5 coin to commemorate the SARB’s 90th anniversary. Incredibly poorly reproduced.

SCA case 17 May 2011: Engelbrecht v The State (446/10) [2010] ZASCA 068. Good grief! The appellant was the sales manager of Reeds Motors, in Observatory, Cape Town. (It’s practically a national monument.) He was part of a scam involving the simulated ex-port of vehicles to Namibia in order to abuse the zero-rating provisions of the Value-Added Tax Act. His appeal against his conviction did him very little good.*

Treasury release 18 May 2011: By the MOF on the IMF. At least he had the grace not to demand that the next head of the IMF be appointed on merit.

GN 304 GG 34303 20 May 2011: Notice & order of forfeiture under regulation 22B of the Exchange Control Regulations under s 9 of the Currency & Exchanges Act. Imtiaz Ahmed, Iqbal Electronics & Mogia International Trading CC lose trivial amounts.

BPR 103 20 May 2011: Share-incentive scheme. Now this is what I call a statement of a prob-lem. Anyone could work through it, without any further information. My compliments to its author. Yet the applicant had better watch out. The Commissioner has not considered himself to enjoy any power under para 2(1) of the Fourth Schedule to the Income Tax Act for more than a decade. And I am surprised that no mention is



made of s 10(1)(k)(i)(dd). (I cheated a bit there. Regular correspondent Carl Nielsen has been writing to me about the connection, which I don’t understand, between the exemption of dividends & s 8C, which taxes targeted share-incentive schemes.)*

Draft bill 20 May 2011: Second-round draft of the Customs Duty Bill for comment.* SARS release 20 May 2011: Illegal cigarettes with an estimated street value of over R2 million

confiscated. That’s the price of high duties—you create a market for criminals.* Business Day 20 May 2011: Mario Oriani-Ambrosini (IFP) on: Opposing Walmart makes state look

like Nats. I’m glad I’m not the only one to spot the resemblance. Rapport 21 May 2011: Remember the CCB, formerly known as BOSS? This is a story about an

ex-member of the Civilian Co-operation Bureau & his alleged troubles with SARS. He claims that Rapport has no right to publicize his travails, & I have insufficient facts to gainsay him. To me, the CCB was an outfit whose members one arm of government rewarded with large sums, while other arms tried to murder them in order to retrieve the loot. Sort of like politics today.§

Treasury release 22 May 2011: Joint statement by the MOF & the Australian deputy prime minister & treasurer, Wayne Smith, on the selection process of the MD of the IMF. Oops! I spoke too soon. This demand requires ‘the most competent person being appointed, re-gardless of their nationality’. What a cheek, coming partly from an ANC cadre. In my humble view, even as accomplished as he is, Our Trev would not fit in at the IMF.

Beeld 22 May 2011: Phuti John Mangwato, a former SARS employee found guilty of VAT fraud, has his sixty-four-year sentence imposed by a Polokwane magistrate reduced to four years by the North Gauteng High Court, Pretoria, even though the magistrate refused him leave to appeal. A senior magistrate (Bless his soul!) brought the matter to the attention of the High Court.§

BPR 104 23 May 2011: Intra-group transfer of shares as a result of restructuring.* Treasury release 23 May 2011: Extension of time for comment on the draft financial sector policy

document: A safe financial sector to serve SA better, until 30 June 2011. SARB release 24 May 2011: Monetary policy review—May 2011. Business Day 24 May 2011: SARS ‘on top of new electronic transfer duty system’. This according to

Mark Kingon (SARS). I don’t know where my sympathies lie, since the counterparties are conveyancers, who are described by an industry spokesperson as ‘not knowing how the new system worked’. And a lot else, besides.§

New VDP document 25 May 2011: Guidelines on waiver/non-waiver of penalties, additional tax & interest in terms of s 6 of the Voluntary Disclosure Programme & Taxation Laws Second Amendment Act, 2010. Not only does this stupid VDP insist on imposing some penal-ties but not others, but it does not apply to every tax administered by the Commis-sioner. Luckily, SARS is unaware of or ignorant about the second point.*

Volksblad 25 May 2011: Martie Kasselman, a former director of Pam Golding in the Free State Goldfields, is found guilty of VAT & PAYE theft by the Welkom regional court. Her for-mer company was also found guilty. The investigator was Tessa du Plooy of the SARS Kimberley criminal investigation unit. The prosecutor was adv Wellington Sam-pezi of the specialized tax unit of the National Prosecuting Authority. Yet I find no mention of that unit on the NPA’s website. Does the NPA also make up outlandish unit-names, like SARS? My very best, ever, remains the SARS outfit in Pretoria calling itself ‘The War Room’ (22 TSH 2005).§

Business Day 25 May 2011: SARS ad: Employers…don’t get caught off balance. Employers’ tax season.

SARB release 26 May 2011: Senior deputy governor of the SARB, Dr X P Guma is not renewing his contract, which seems to be a strange way of announcing his retirement from the bank after sixteen years of service. Does the SARB indulge in stilted language as a matter of course or does its use signify some hidden agenda? Dr Guma goes into a three-month cooling-off period, by which I understand him to have something lined up already.

SARB speech 27 May 2011: By Daniel Mninele, deputy governor, on: Monetary policy in volatile & uncertain times.

Business Day 30 May 2011: SARS is one of twelve respondents in an application filed by two, well-known Tigon executives. Will this matter ever be resolved?

Business Day 31 May 2011: Sanchia ‘Press Release’ Temkin does it again (73 TSH 2009; 88 TSH 2010), with: SARS land tax ruling shock for developers. A hopelessly ignorant write-up on the Founders Hill case.

Beeld 01 June 2011: Oops! ANC/Gupta dull-as-ditch-water rag, This Day—no, that can’t be right—New Age—I mean to say—loses it second editor, Henry Jeffreys.

* Found or to be found on the SARS website. † Not in ‘What’s new’ page on SARS website.

§ Not included in Tax Shock, Horror Database.




LOST & FOUND TSH Database This month 61 items were added to the Tax Shock, Horror Database. Land subdivision Since 16 September 1998, the President has failed to proclaim the Subdivision of

Agricultural Land Act Repeal Act 64 of 1998. Provisional tax tables Since 25 April 2003, SARS has failed to gazette the annual provisional tax tables. PAYE tax tables Since 1 March 2011, SARS has failed to gazette the annual employees’ tax deduction

tables. Exempt grants & After a delay since 1 February 2006, the MOF has finally issued the Gazette notice scrapping payments required to make s 10(1)(y) effective. See the Monthly Listing.

MONTHLY NOTEBOOK

VAT & PAYE on car benefits—the disconnect continues

Rob Cooper (Softline VIP) reports that

the SARS VAT people are still chewing over the outdated 1991 VAT regulation prescribing the calculation of VAT on the company car fringe benefit (95 TSH 2011).

This is GN R 2835 of 22 November 1991, which includes a definition of the term ‘determined value’, that is, of a company car. Unamended since 1991,

it differs from the current PAYE definition of the same term (para 7 of the Seventh Schedule to the Income Tax Act) by excluding VAT and by treating maintenance expenses paid for by an employee differently.

The upshot is that, as the law stands, you have to make two calculations of determined value, one for VAT and the other for PAYE.

A not‐very‐deep secret of the property industry

Annetjie Fermor (Propjet Management) asks:

Can you please help with this question? We are pur-chasing properties from a seller but paying the pur-chase price to a firm of attorneys. From whom should we get the VAT invoice? The attorneys are saying that they don’t issue VAT invoices, since we are not buying the properties from them.

As far as I know, especially the very biggest play-ers in the property industry have always refused to supply tax invoices when selling fixed property, for reasons unknown to me but at enormous risk for buyers that are vendors. So perhaps you are enjoy-ing the usual runaround.

It is a criminal offence (s 58(l) of the Value-Added Tax Act) for a registered vendor to fail to supply a tax invoice to a recipient, as is required by s 20(1).

It is unlikely that the attorneys are acting as agents for the seller as far as concerns the sale (as opposed to the collection of the proceeds). If they are, s 54(1) authorizes them to issue a tax invoice, in their own name.

The proper course is to sue the sellers for dam-ages should they refuse to comply with the law, since it is highly unlikely that you will find anyone prepared to prosecute a statutory crime when no member of the elite is involved, on either side.

Bank details—a massive risk

Regular correspondent Carl Nielsen (Dulverton Financial Services) sent me a copy of a letter writ-ten to Willie Viljoen (SARS). This is an edited ver-sion:

I must bring to your attention what I think is a massive potential risk that SARS has caused.

A week or two ago, I got a letter (via SAIPA, I think) from SARS with the subject REQUEST FOR CHANGE OF

BANK DETAILS. This undated letter addresses the issue of fraud attendant upon the changing of bank details and hence is to do with the bank details relevant when refunds are paid: in other words, the bank details that are held in SARS’s core systems—outside of eFiling.

It states that changes to bank details will be effected through four channels; actually an error, in that the fourth bullet point is actually just the second line of the third point. Thus only three channels actually exist.

The first channel is ‘in person at any SARS branch’. Fair enough, and the rest of the letter goes on to ex-plain what is needed in order to use this channel.

The second is via ‘SARS eFiling (if registered as an eFiler)’. I made enquiries about this one and initially was sent a response telling me how to update banking details on eFiling. These are the details that eFiling uses when making payments to SARS. But it is not true that updating these impacts upon the bank details on SARS’s core systems. Further clarification did highlight that the person responding had misunderstood my question and thought that I was asking about eFiling only. Nevertheless, I believe that there is a strong risk of taxpayers’ updating their bank details on their eFiling profiles and assuming that this has affected the details stored by SARS and used for VAT refunds.

The third channel supposedly opens ‘when submit-ting an Individual Income Tax Return (IT 12), Return of Income: Companies and Close Corporations (IT 14) and (Employer Declaration) EMP 501 return/reconci-liation’. I know that SARS’s core system is updated on the basis of bank details submitted on an IT 12. I also know that it definitely is not affected by bank details en-


tered on an IT 14—the system completely ignores those bank details. I don’t know about the EMP 501 but what would be the point? There are to my knowledge

never any refunds relating to EMP 501 returns Kind regards, Carl Nielsen

Medical harassment by SARS

Nico Maartens (N F Maartens & Co) writes:

I have lately noticed that SARS deny medical aid claims that were not paid by a medical aid scheme as a de-duction. SARS requests proof of such claims, even if the medical aid stated that the portion of the costs were for the account of the taxpayer.

When I asked him for details I was little prepared for the response, inclusive of copies of correspon-dence:

The timeline of events was as follows: 2010 tax return submitted to SARS via eFiling. SARS requests supporting documents. Supporting documents submitted to SARS, of which

one was the medical aid tax certificate. SARS indicates that they are not allowing the mem-

ber’s-responsibility portion as shown on the medical aid certificate without proof.

This is the first time in thirty-five years in practice that I have encountered something like this. Yes, we had to prove medical expenses falling completely outside of medical aid certificates. That I do understand. But medical expenses shown as the member’s responsibil-ity on a tax certificate? Never.

In this particular matter the medical aid pays only

75% of claims, while the taxpayer underwent two op-erations during the year. That is the reason why the member’s portion was so high.

The taxpayer made copies of all the medical ac-counts, something like 212 copies, hand-delivered to SARS. We have proof of delivery.

These days I find assessors to be reading-impaired.

Assessors? I have met perhaps one or two or per-haps three in a decade. SARS is hiring people straight off the street. The only training they get is how to cut and paste unconstitutional and defama-tory attacks on those taxpayers least likely to fight fire with fire.

In theory, I suppose, a medical aid certificate might be loaded with fake claims rejected by the medical aid, but would SARS in any event be able to spot fake claims submitted to it?

This is far more probably merely another ruse to discourage even legitimate claims, especially since the disallowance was triggered simply by the tax-payer’s failure to enclose medical receipts with his return. Where does it say you have to do that? I was under the impression that taxpayers are dis-couraged from submitting proof of claims unless required to do so.

Getting advice from SARS can drive you to breaking the law

Shirley Renwick writes: Does anyone else have the same issues? First, the very inappropriately named e@syFile has

a new, updated version, v 4.3.2. This proves impossi-ble to download because it is too big. After numerous phone calls and emails, I finally get the information that SARS employees are going out to businesses with their personal flash-sticks to install the programme. It is not available on DVD for some reason they are unable to explain. So I go to SARS and get v 4.3.2 on a flash-stick and install it. This version does not work properly.

The next day I try again and find that there is a new version! I phone SARS and am told it was rolled out the previous day (election day!), because people are ex-periencing so many problems with it. Strange! On a public holiday, with no announcements or notices!

I phone SARS, and two officials kindly came to my office and install, v 4.3.3.

Since installing this version I have tried to connect on a daily basis, to no avail. I phoned the local SARS of-fice (the call centre is a pathetic joke), and they ad-vised me that there was insufficient bandwidth. They suggested that I try connecting outside normal working hours. I tried this at 06h30—still unable to connect.

Time is rapidly running out, and I am unable to sub-mit my returns. I am also unable to synchronize or to register employees for income tax or obtain income tax

reference numbers. I think these issues need to be addressed. Clearly,

the e@syFile versions are not adequately prepared and tested. I spoke to a payroll company which was in-volved in Beta testing, and they said that they had ad-vised SARS of a number of issues and were ignored.

SARS officials have also said that they have fre-quently requested either training on the technical sup-port side of the programme or that a representative from eFiling be available at each office—to no avail.

Apparently SARS officials have to call the eFiling call centre as well—they don’t have their own line to eFil-ing!

There is only one person from eFiling dealing with tax practitioners issues countrywide—so he is not pre-pared to assist more than eight clients per day. This is what I was told by SARS employees, off the record.

The other problem she experienced was confusion between ID numbers and tax reference numbers:

I then asked the same SARS official what I should do about those employees on my client’s payroll that have no ID numbers. This client is a farmer. There are probably hundreds of thousands of people in the rural areas without ID numbers, and who also find it too on-erous to obtain ID numbers. The only answer he could give me was that everyone had to have a tax reference number, and they could not get a reference number



without an ID. Does this mean that anyone without an ID document is unemployable? Surely this is unconsti-tutional. The SARS official also refused to give me the name of anyone to assist me in what to do about the 2011 payroll, which has some employees with no ID number, simply saying that nobody could help me, since the rules were that everyone has to have a tax reference number.

So how do I advise my client? Remove the employ-ees from the payroll before submission? Illegally allo-cate the wages paid to another expense account?

More and more, these bizarre regulations are forcing us to become criminals!

The problem lies not with any regulations—in fact,

appropriate regulations are in short supply, and what are bizarre are the SARS units that go off for extended periods on frolics of their own. And I have repeatedly referred to the sociopathic nature of anything emerging from eFiling and e@syFile.

We need to uncover who or what is behind these initiatives, how they won the tender, if ever there was a tender, and from whence comes their utter contempt not merely for the Constitution but for ordinary commercial practice in the development of major computer systems and programs.

Strangely, the lack of leadership at SARS started a long time ago, enduring over the reign even of the last Commissioner, who made a jolly good show of looking like a leader.

‘Gross income’: reading the law, in sets

You have possibly read the definition of the term ‘gross income’ in s 1 of the Income Tax Act a hun-dred times—yet, have you?

‘[G]ross income’, in relation to any year or period of assessment, means—

(i) in the case of any resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such resident; or

(ii) in the case of any person other than a resident, the total amount, in cash or otherwise, received by or accrued to or in favour of such person from a source within or deemed to be within the Re-public,

during such year or period of assessment, excluding receipts or accruals of a capital nature, but including, without in any way limiting the scope of this definition, such amounts (whether of a capital nature or not) so received or accrued as are described hereunder, namely—

If you ever underwent any formal study of taxation, you would have been told that the famous special inclusions—paragraphs (a) to (n)—in ‘gross in-come’ following this opening statement are meant specifically to bring within the scope of the defini-tion receipts and accruals of a capital nature, de-spite the general exclusion of such receipts and accruals. In other words, for ‘residents’, the open-ing words encompass the full set of worldwide non-capital receipts and accruals, while the special in-clusions comprise a list of sets of receipts and ac-cruals of a capital nature.

What tosh. The truth is that the opening state-ments does not by any measure constitute the full set of noncapital receipts and accruals, for the rea-son that several of the special inclusions clearly comprise further such sets. And one of the instinc-tive rules of sets is that you do not include within—that is, add on to—a set items it already includes. It follows that, without benefit of cross-references or ‘subject to’ clauses, what is specifically included after the opening statement must have been omit-ted from that statement to begin with.

For some of the famed special inclusions, then, the word including actually means excluding the following items, which are to be specifically in-

cluded. Most conspicuously omitted are receipts and ac-

cruals having their origin in services rendered, os-tensibly a separate set catered for by para (c) of the definition:

(c) any amount, including any voluntary award, received or accrued in respect of services rendered or to be rendered or any amount (other than an amount referred to in section 8(1)) received or accrued in respect of or by virtue of any employment or the holding of any office: Provided that…;

I don’t know about you but I was never taught that the additional, para (c) set of receipts or accruals springing from services rendered in fact breaks down into two separate sets, one covering the ser-vices of independent contractors,

any amount, including any voluntary award, received or accrued in respect of services rendered or to be ren-dered,

and the other covering what in our tax treaties is referred to as ‘dependent personal services’, that is, employment (in the labour-law sense) and the holding of an office:

or any amount (other than an amount referred to in section 8(1)) received or accrued in respect of or by virtue of any employment or the holding of any office: Provided that…;

The exclusion from the second services set of s 8(1) amounts, that is, of allowances, tells you what ten or more years of study of s 8(1) itself will not conclusively reveal—that s 8(1) applies solely within the context of dependent personal services. After all, instinctively, you cannot exclude from a set items that it does not already include.

The far bigger picture is that the opening state-ment of what is ‘gross income’ not only excludes service-related receipts or accruals but all allow-ances, which, to the extent that they are taxable are in fact included in ‘taxable income’ (not gross income) by s 8(1).

It also excludes fringe benefits. The first proviso (it is not really a proviso) to para (c) at first sight comes across as an exclusion from both services-



related sets of receipts of accruals (that is, both dependent and independent personal services):

Provided that— (i) the provisions of this paragraph shall not apply in

respect of any benefit or advantage in respect of which the provisions of paragraph (i) apply;

But when you read para (i) and, indeed, the Sev-enth Schedule to the act, you are compelled to acknowledge that it, too, applies only within the context of dependent personal services:

(i) the cash equivalent, as determined under the provi-sions of the Seventh Schedule, of the value during the year of assessment of any benefit or advantage granted in respect of employment or to the holder of any office, being a taxable benefit as defined in the said Schedule…;

At least at some stage in the past the remaining service-related inclusions in ‘gross income’, such as a payment for the unexpired portion of an em-ployment contract or a restraint, were considered to be or possibly were of a capital nature and so were specifically included.

As far as noncapital receipts or accruals are concerned, then, the definition of the term ‘gross

income’ ought to have been drafted in the following form (I grasp the opportunity to fix a few other problems):

DEMOTIC DRAFTING s 1 sv ‘gross income’ ‘[G]ross income’ means the total amount, in cash or

otherwise, derived by a resident during the year of as-sessment or the total amount, in cash or otherwise, de-rived by a nonresident from a source within or deemed to be within the Republic during the year of assess-ment, excluding, first, such an amount so derived by reason of services rendered or to be rendered of an independent nature or dependent personal services rendered or to be rendered and the taxable portion of a fringe benefit as determined under the Seventh Schedule, which are specifically included in this defini-tion, excluding, secondly, the taxable portion of an al-lowance determined under s 8(1) and so specifically included in taxable income, and excluding, thirdly, re-ceipts or accruals of a capital nature not specifically in-cluded in this definition, and including…;

One advantage my version enjoys over the original is that it makes it clear that, for nonresidents, the source principle applies throughout the definition of the term ‘gross income’. That, I am sure, is the officially desired outcome.

How tax debts due to the state arise—II (PAYE)

In 96 TSH 2011, I showed, beyond contention, that all the taxes imposed by the Income Tax Act, apart from the ‘Fourth Schedule’ taxes—PAYE and provi-sional tax, imposed under the Fourth Schedule to the act—are either directly or, via, s 79, indirectly required to be the subject-matter of assessments before they stand to qualify as debts due to the state recoverable by SARS under s 91:

Recovery of tax 91. (1)(a) Any tax or any interest payable in terms of

section 89(2) or 89quat shall, when such tax or interest becomes due or is payable, be deemed to be a debt due to the State and shall be payable to the Commis-sioner in the manner and at the place prescribed.

The ‘taxes’ so covered comprise normal tax under s 5, additional tax under s 12G(12) and s 12L(15), the liftings tax under s 33, the withholding tax on royalties under s 35, the withholding tax on foreign-owned property under s 35A, the tax on foreign entertainers and sportsman under s 47B, the turn-over tax under s 48A, the donations tax under s 54, the secondary tax on companies under s 64B, ad-ditional tax under s 76, and administrative penalties imposed under s 75B.

Some of these are so-called self-assessment taxes, under which you effectively volunteer pay-ments. (In truth, all tax is voluntary. As a percent-age of GDP, tax collections in the USA remain un-changed over decades, no matter how much the law changes. Check it out for yourself.) Even so, those sad, untrained saps at SARS cannot get a penny extra from you without raising an assess-ment.

Although I can hardly contain my impatience to

reveal the earth-shattering consequences of this state of affairs, which will tweak the nose of every constitution-busting tax official in the land, whether abusive, arrogant high-up or abusive, defamatory handlanger, as well as some arse-kissing private-sector types, I must first finish with the Income Tax Act and then go on to the other principal taxing statutes, such as the Value-Added Tax Act.

Thus it is the turn now of the Fourth Schedule taxes, first PAYE. Stand by for some stuff you never learnt at university.

Fourth Schedule taxes are not your ordinary self-assessment taxes, thanks to what I call their dual-ity, in that, at first, they appear to be independently payable, regardless of actual liability for normal tax. Only at the moment of assessment do they be-come advance payments against actual liability (under para 28 of the Fourth Schedule):

Payments of employees’ tax and provisional tax and interest on overdue payments of such taxes

89bis. (1) Payments by way of employees’ tax and provisional tax shall be made in accordance with the provisions of the Fourth Schedule…, and any such payments which relate to a taxpayer shall, for the pur-poses of this Act and subject to the provisions of para-graph 28 of the said Schedule, be deemed to have been made in respect of his liability for taxes as de-fined in subsection (3), whether or not such liability has been ascertained or determined at the date of any payment.

What is awkward is the fact that, although a provi-sional taxpayer makes his own payments, a PAYE employee’s payments are made by his employer. The wording of s 89bis(1) caters adequately for this



awkwardness (‘payments which relate to a tax-payer’). Far more serious is the fact that, while the provisional tax is about payments, PAYE is mostly about deductions. (I have not yet fully resolved this issue to my own satisfaction.)

Independent liability for PAYE deductions is estab-lished by para 2(1) of the Fourth Schedule:

Employers to Deduct Tax 2. (1) Every— (a) employer who is a resident; or (b) representative employer in the case of any em-

ployer who is not a resident, …who pays or becomes liable to pay any amount by

way of remuneration to any employee shall…deduct or withhold from that amount…by way of employees’ tax an amount…in respect of the liability for normal tax of that employee…and shall pay the amount so deducted or withheld to the Commissioner within seven days af-ter the end of the month during which the amount was deducted or withheld….

This independent liability is so real that it consti-tutes a debt due to the state, although a conditional one (see the words in bold type below), which is crystallized at the point at which the PAYE system switches from deductions to payments:

4. Any amount required to be deducted or withheld in terms of paragraph 2 shall be a debt due to the State and the employer concerned shall save as otherwise provided be absolutely liable for the due payment thereof to the Commissioner.

As in all self-assessment systems, provision has to be made for an employer who fails to adhere to the requirements of para 2(1). The procedure to be followed (due process) starts with para 5(2):

(2) Where the employer has failed to deduct or with-hold employees’ tax in terms of paragraph 2 and the Commissioner is satisfied that the failure was not due to an intent to postpone payment of the tax or to evade the employer’s obligations under this Schedule, the Commissioner may, if he is satisfied that there is a reasonable prospect of ultimately recovering the tax from the employee, absolve the employer from his li-ability under sub-paragraph (1) of this paragraph.

SARS cannot simply ignore such a provision. The first thing required is the exercise by the Commis-sioner of his discretionary power to ascertain the employer’s intention in allegedly failing to make the required deduction. Next, he must establish the creditworthiness of the employee concerned. He is obliged to apply his mind in this manner and on these two enquiries. Should these yield positive results, in the sense that (a) the employer was not evading tax, and (b) the employee is good for (or even has paid) the tax allegedly not withheld, the Commissioner is obliged to absolve the employer from his liability to have made deductions.

Thus para 5(2) proves that there is no absolute liability under the PAYE system on the defaulting employer’s part, since there is a condition to be tested, namely, the outcome of the application by the Commissioner of his mind to these enquiries.

This condition is of a resolutive character: the employer, say, factually did not deduct (and there-fore did not pay); the employer became personally liable under para 4 to pay; but his liability will be expunged if the Commissioner’s enquiries produce a positive result.

Having commenced in para 5(2), the procedure to be followed (due process) when an employer fails to adhere to the self-assessment requirements of para 2(1) and has not been absolved of liability culminates in para 12(1):

12. (1) Where any employer who is required to deduct or withhold employees’ tax in terms of paragraph 2—

(c) has failed to deduct or withhold employees’ tax; or (d) has failed to pay over any amount of employees’

tax deducted or withheld, and such employer has not been absolved from his or

her liabilities in terms of the provisions of this Sched-ule, the Commissioner may make a reasonable esti-mate of the amount of employees’ tax which is required to be deducted or withheld and issue to the employer a notice of assessment for the unpaid amount.

This first re-emphasizes the importance of the em-ployer’s right to benefit from due process in the matter of the Commissioner’s power to condone a nondeduction, under para 5(2). Then it requires the Commissioner (a) to make an estimate of the amount involved and (b) issue a notice of assess-ment. A notice of assessment is effectively an ‘as-sessment’ as defined in s 1.

If you know absolutely nothing about statutory law, you might argue that, owing to its use of the word may, para 12(1) is not binding upon the Commissioner, yet the world’s most famous legal dictionary, Black’s, points out that in dozens of cases the word ‘may’ has been found to mean shall or must, but its primary legal meaning is is permit-ted to, which is what it means here.

For example, in Vacation Exchanges Interna-tional (Pty) Ltd v CSARS (case no A 253-2008) the court said that the word may in para 3(2) of the Seventh Schedule (fringe benefits) meant that SARS could recover any shortfall of tax only from the em-ployee, and not from the employer.

Better still, if may allows the Commissioner ca-priciously to choose whether or not to obey the law, what would you make of provisions such as para 6(2A) of the Fourth Schedule?

(2A) If an employer fails to pay an amount of employ-ees’ tax with intent to evade that employer’s or any employee’s obligations under this Act, the employer may be liable to pay a penalty not exceeding an amount equal to twice the amount of employees’ tax which that employer so failed to pay.

Would you say the defaulting employer has a choice whether to be mulcted in a penalty?

What para 12(1) supports is the rule emerging again and again from a reading of the act as a whole:

SARS cannot demand a penny from you without first raising an assessment, against which you may object and appeal.



Who needs Parliament when we have the Treasury?

Principal Act Taxation Laws Amendment Act, 2010

Taxation Laws Amend-ment Bill 2010

Transfer Duty Act— s 2(1): ‘after section 3’ inserted s 2(1): Income Tax Act— Paragraph (b)(i)(aa) of the definition of ‘for-eign partnership’ in s 1:

s 6(1)(j) ‘accrues’

s 6(1)(j) ‘accrued’

Paragraph (mA) of the definition of ‘gross income’ in s 1:

s 6(1)(n) para (mA)(i) and (ii)

s 6(1)(n) para (mA)(a) and (b)

Definition of ‘severance benefit’ in s 1: s 6(1)(zF) ‘section 23(p))’

s 6(1)(zF) ‘section 23(p)’

Paragraph (b)(i) of definition of ‘trading stock’ in s 1:

s 6(1)(zI) ‘or’

s 6(1)(zI) ‘or;’

Section 9D(2A)(l): s 16(1)(i) ‘where’

s 16(1)(i) ‘(l) where’

Section 9D(6)(b): s 16(1)(l) ‘[and]’

s 16(1)(l) ‘and’

Section 9D(6)(c): s 16(1)(l) ‘and’

s 16(1)(l) ‘’

Section 37I(1): s 58(1) ‘Withholding tax on inter-

est’

s 58(1) ‘Withholding Tax on

Interest’ Section 37I(1): s 58(1)

‘government debt instru-ment’

s 58(1) ‘Government debt in-

strument’ Proviso (a) to definition of ‘prescribed pro-portion’ in s 41(1):

s 61(1)(d) ‘ ‘: Provided that’

s 61(1)(d) ‘ ”: Provided that’

Section 64B(5)(f)(i): s 68(1)(g) ‘shareholder];’;’

s 68(1)(g) ‘shareholder],”;’

Section 64C(2)(e): s 69(1)(c) ‘nil.’;’

s 69(1)(c) ‘nil.”.’

Section 64F(i): s 72(1)(a) ‘; [or]’; and’

s 72(1)(a) ‘; or”;’

s 97 ‘Amendment of para-

graph 31 of Eighth Schedule’

s 97 ‘Amendment of para-

graph 31 of the Eighth Schedule’

s 106 ‘by section 75 of Act 17 of

2009’

s 106 ‘by section 90 of

Act 74 of 2000 and by section 75 of Act 17 of 2009’

s 108 ‘section 79 of Act 31 of

2005’

s 108 ‘section 79 of Act of

Act 31 of 2005’ Section 64B(5)(a) of the Eighth Schedule s 108(2)

‘(2) Paragraphs (a), (c), (d), (e), (f), (g), (h), (i), (j), (k), (m) and (n) of subsection (1) come into operation on 1 January 2011’

s 108(2) ‘(2) Paragraphs (a), (c),

(d), (e), (f), (g), (h), (i), (j), (k), (m), and (n) of sub-section (1) come into op-eration on 1 January 2011’

These are the differences between the Taxation Laws Amendment Bill, 2010, as passed by that quaint institution, Parliament, and the Taxation Laws Amendment Act, as amended by the gangsters at the Na-tional Treasury. Whoever is responsible has committed an illegal act, of lèse majesté. Worse still, he or she is incredibly petty to want to make such piffling changes in the first place.

The shaded rows contain the more significant changes.


Feature Supplement to 98 Tax Shock Horror 2011

Briefing

May 2011 Leasehold improvements

by Michael Stein © 2011 M L Stein ([email protected])

Section 11(g) of the Income Tax Act is a longstand-ing provision making an allowance available to a taxpayer who incurs expenditure in pursuance of an obligation to effect improvements on land or to buildings. To qualify for deduction, the expenditure must be incurred under a lease agreement, and the land or buildings must be used or occupied by the taxpayer for the production of income or income must be derived from the land or buildings.

There are lots of terms attached but the amount that may be deducted is limited to the amount stipulated in the lease as the value of the im-provements or as the amount to be expended on them. If no amount is stipulated, the deduction is limited to an amount that the Commissioner opines is the fair and reasonable amount required to be expended on the improvements, for example, when the taxpayer is required to make specified im-provements and no amount is stipulated in the lease.

The deduction of the amount required to be ex-pended is then spread over the period of the lease remaining once the improvements have been com-pleted, but with a maximum period of twenty-five years.

In the old days the erection of many fine build-ings, notably along Durban’s Marine Parade but not only there, was apparently subsidized by taxpayers in general when lessees took advantage of this allowance when effecting improvements to property hired from tax-exempt bodies such as municipali-ties and other governmental entities.

Lessor restrictions The amount required to be expended on the im-provements falls into the gross income of the lessor under para (h) of the definition of ‘gross income’ in s 1 of the Act and some relief may be available under s 11(h), essentially to allow for the fact that the lessor suffers an immediate inclusion in gross income but will not enjoy the free use of the im-provements until the lease has run its course.

Section 11(g) was amended several years ago to make the allowance unavailable when the amount expended by the lessee did not constitute income for the lessor, that is, when the lessor was a tax-exempt body.

And then, some years later, an exception was created to make the allowance available once

again when the lessor was tax exempt, as long as it was exempt because the improvements were effected under a Public Private Partnership or the land or building was owned by the government, a provincial administration or a municipality or quali-fying tax-exempt entities (those exempt under s 10(1)(cA) or (t)).

This provision was once more amended for leases entered into on or after 2 November 2010 so as to make the deduction unavailable again when the amount of the improvements does not constitute income of the lessor.

The current position Section 12N was inserted into the Act with effect as from 2 November 2010, and applies to rights of use or occupation granted on or after that date.

It comes into operation when a lessee incurs an obligation to effect improvements on land or build-ings under a Public Private Partnership or a lease of land or buildings owned by one of these same tax-exempt lessors.

A lessee who completes the improvements, uses or occupies the land or building for the production of income or derives income from it is deemed by s 12N to be the owner of the improvements for the purposes of specified capital allowances, even though, in law, the improvements belong to the lessor who owns the land. Since the allowances concerned are available only to the owner of the improvements and not a lessee who effects them, s 12N effectively extends them to lessees who erect qualifying improvements. The lessee is then deemed to have disposed of the improvements to the owner of the property when the lease termi-nates. Section 12N is inapplicable to lessees who carry on a banking, financial services or insurance business and to disqualified sub-leases.

Affected allowances The affected allowances are those provided by s 11D (scientific or technological research and de-velopment), s 12D (pipelines, transmission lines and railway lines), s 12F (airport and port assets), s 12I (industrial policy projects), s 13 (manufactur-ing buildings), s 13bis (hotel buildings), s 13ter (residential buildings), s 13quat (urban develop-ments zones), s 13quin (commercial buildings), s 13sex (residential units) and s 36 (mining).

The rule also applies to the capital gains tax.t s h

mailto:[email protected]

Shortcut Keys in Word by Duncan S McAllister ©2011

May 2011

ALT sequence keys in Word 2007—IV

This month I examine the shortcut keys for modify-ing tables. These keyboard shortcuts become available only once you are in a table. See Part III

of this series for the shortcut keys for inserting or drawing a table, converting text to a table, inserting an Excel spreadsheet and quick tables.

ALT sequence keys (Word 2007)—Table modification keys

ALT, J, L, K, L Select Cell ALT, J, L, F, N Fixed Column Width

ALT, J, L, K, C Select Column ALT, J, L, H Table Row Height

ALT, J, L, K, R Select Row ALT, J, L,, U, R Distribute Rows

ALT, J, L, K, T Select Table ALT, J, L, W Table Column Width (edit)

ALT, J, L, T, G View Gridlines ALT, J, L, U, C Distribute Columns

ALT, J, L, O Properties ALT, J, L, O Properties

ALT, J, L, D, D Delete Cells ALT, J, L, T, L Align Top Left

ALT, J, L, D, C Delete Columns ALT, J, L, T, C Align Top Centre

ALT, J, L, D, R Delete Rows ALT, J, L, T, R Align Top Right

ALT, J, L, D, T Delete Table ALT, J, L, C, L Align Centre Left

ALT, J, L, A Insert Row Above ALT, J, L, C, C Align Centre

ALT, J, L, E Insert Row Below ALT, J, L, C, R Align Centre Right

ALT, J, L, L Insert Left ALT, J, L, B, L Align Bottom Left

ALT, J, L, R Insert Right ALT, J, L, B, C Align Bottom Centre

ALT, J, L, I Insert Cells ALT, J, L, B, R Align Bottom Right

ALT, J, L, M Merge Cells (operates when cells to be merged are selected)

ALT, J, L, G Text Direction

ALT, J, L, P Split the selected cells into multiple new cells

ALT, J, L, N Cell Margins

ALT, J, L, Q Split table into two tables ALT, J, L, S, O Sort

ALT, J, L, F AutoFit ALT, J, L, J Repeat Header Rows (op-erates when cursor is placed in header row)

ALT, J, L, F, C AutoFit Contents ALT, J, L, V Convert to Text

ALT, J, L, F, W AutoFit Window ALT, J, L, U, L Formula

t sh


---------------------------

Davey’s Locker

May 2011 Preservation funds New regulations

by Tony Davey © 2011 A H Davey ([email protected] www.tonydavey.com)

RF 1/2011 Definitions of ‘pension preserva-tion fund’ and ‘provident preser-vation fund’ were inserted into s 1 of the Income Tax Act by the Taxation Laws Amendment Act 3 of 2008.

This tax legislation replaced Retirement Fund Notice RF 1/98 and its addenda in most re-spects. Effective as from 30 September 2010 (that is, ret-rospectively), SARS has fully with-drawn RF 1/98 and replaced it with RF 1/2011, which must thus be interpreted in the context of and in conjunction with the In-come Tax Act’s definitions. (As an aside, any research of retire-ment funds legislation and tax on such funds is always a ‘Google-search’ experience, since you have to read and interpret not one, convenient piece of legisla-tion but the Income Tax Act, the Pensions Fund Act and subordi-nate legislation, including these RF notices.)

Benefit-splitting prohibition Under the new RF notice, SARS has prescribed two additional requirements for the approval of pension preservation funds, which will require amendments to fund rules to be submitted to it for approval on or before 31 Oc-tober 2011. (Although not ex-pressly required, the same amendments are presumably required for provident preserva-

tion funds.) In essence, benefits transferred into or out of a pres-ervation fund may not be paid or transferred in such a way that the benefit amount is split be-tween more than one preserva-tion fund or retirement annuity, nor any combination of these. (The only exception in an exit-transfer from a preservation fund arises in circumstances in which there were separate payments into the same fund.)

Withdrawal treatment Paragraph (c) of the definition of a ‘pension preservation fund’ in s 1 of the Income Tax Act states that

not more than one amount…is allowed to be paid to the member during the period of membership of the fund’ (my emphasis).

RF 1/98 imposed far greater re-strictions, in that, first, any amount encashed before trans-fer to a preservation fund was regarded as the one-off with-drawal, and, secondly, any s 37D (of the Pension Funds Act) deduction (loans, medical aid subscriptions and divorce awards) was also considered to be the one-off withdrawal.

With the withdrawal of RF 1/98, it follows that both restrictions no longer apply, while the Income Tax Act refers only to the period of actual membership of a pres-ervation fund and not to any


May 2011

earlier period. Thus, although the position remains that only one withdrawal is allowed from a preservation fund, my interpreta-tion is that amounts withdrawn in the circumstances mentioned before transfer will also be per-mitted.

The tax treatment of such withdrawals remains ring-fenced under the prescribed withdrawal tax table, which taxes withdrawal benefits on a cumulative basis

as from 1 March 2009. In es-sence, R22 500 is tax free, with the balance of up to R600 000 being taxed at 18%, the next R300 000 at 27%, and thereafter at a flat 36%.

Bear in mind that a divorce award against a retirement fund is also taxed as a withdrawal benefit but the recipient spouse (the non-member spouse) bears the tax (89 TSH 2010).

t s h

Bsp Seminars ®

If you can’t attend our seminars, then buy our notes!

Tax dimensions of borrowing & lending

Tax dimensions of property leases

—movable & immovable Two-day tax retreat: A full-on PAYE course

How to fight penalties, addi-tional tax & interest

How to use the voluntary disclosure programme

Two-day tax retreat: A full-on VAT course

Bsp Seminars®

Postal address: Postnet Suite 72, Private Bag X87, Bryanston 2021. Telephone: 011-234-2434/082-854-2238. Fax: 011-234-3373.

Fax to e-mail: 086-515-0953. After-hours messages: 082-854-2238. Email: [email protected] URL: www.bspseminars.co.za



http://www.bspseminars.co.za/

http://www.bspseminars.co.za/

May 2011

Evidence Corner—evidence could make a welcome change to tax cases

The litigation privilege

by Andrew Paizes © 2011 A Paizes ([email protected])

So far I have considered two privileges—the legal professional privilege and the privilege against self-incrimination (with its cognate principle, the right to silence). The third privilege to be considered is one that has emerged only re-cently as a separate principle, since it tended, for much of its history, to be seen (quite wrongly) as an off-shoot of the legal pro-fessional privilege.

This third privilege—the so-called litigation privilege—protects the statements of wit-nesses procured for the purpose of furnishing evidence in litigation but, in fact, goes far further. It entitles a litigant to refuse to dis-close any communication that forms part of the litigation brief if it came into existence for the pur-pose of litigation.

As such, it:

(a) applies in both civil and crimi-nal proceedings;

(b) has a separate existence from the legal professional privilege and has a different rationale and different requirements; and

(c) applies not only when the liti-gant is represented by a legal adviser but when he or she is unrepresented.

The rationale of the privilege lies in the widely held belief that the lawyer’s brief is sacrosanct. In the United States this belief is embodied in the ‘work product’

doctrine, which holds that the adversarial system works best when neither party can rely on the other party to procure the evidence, and each is required to act on his or her own initiative. We in South Africa have come, recently, to respect this notion. But, historically, we arrived at the same destination via a different route.

Our experience arose out of the decision to accord a privilege to the docket in criminal proceed-ings, since the disclosure of the statements of witnesses for the prosecution to the defence could lead to a number of undesirable consequences. These, said our courts, included the causing of unnecessary delays and post-ponements; the submerging of the trial in a mass of inquiries as to what witnesses had or had not said; and the creation of opportu-nities for unscrupulous persons to shape their cases on the basis of what the statements contained or to manufacture evidence to con-tradict those statements.

The foundations of the ‘docket privilege’ were, however, rather weak, and it seemed anomalous that a privilege designed for use in civil cases should have arisen in this context in criminal pro-ceedings. But the privilege was undoubtedly a part of our law, and led, in pre-constitutional times, to a blanket exclusion of witness statements (as well as other parts of the docket) in

criminal proceedings, as long as two requirements were satisfied: the communications in question must have been made for the purpose of being placed before a legal adviser in order to enable him or her to advise; and they must have been made after litiga-tion was contemplated.

After the enactment of the Constitution, however, the validity of the docket privilege was chal-lenged on several occasions. It was argued that accused persons were entitled to have access to the statements of witnesses for the prosecution and that the privi-lege constituted an unwarranted limitation of some of the funda-mental rights enshrined in the Constitution. These included the right which every person has of access to any information held by the state or any of its organs, as well as the right of every accused person to a fair trial and, in par-ticular, to be informed with suffi-cient particularity of the charge and to adduce and challenge evidence.

Such arguments met with little success at first but, in 1995, the Constitutional Court in Shabalala & others v Attorney-General of Transvaal & another 1995 (2) SACR 761 (CC); 1996 (1) SA 725 in effect swept away the blanket docket privilege. In its place it put a flexible rule that requires a court, in each case, to exercise a discretion in which the interests of the accused are balanced against


May 2011

those of the state. All the circum-stances have to be weighed, and, although an accused should ordi-narily be entitled to have access at least to the statements of prosecution witnesses, it remains open to the state to justify the denial of access, on the ground that it is not necessary for the purpose of a fair trial.

There are cases in which the interests of the state might pre-vail, such as when the interests of the accused are outweighed by such factors as the danger of disclosing the identity of inform-ers, divulging state secrets, the possibility of the intimidation of witnesses or obstruction of the proper ends of justice. It would be for the court, then, in each case,

to exercise its discretion by bal-ancing the degree of risk to these interests if access is permitted against the degree of risk to the fairness of the trial if it is not per-mitted.

In exercising such a discretion, the court is permitted to examine the disputed documents if this is necessary, without allowing the accused access at this stage.

Also examined by the court in Shabalala’s case was the consti-tutional status of the rule of prac-tice that prohibited an accused or his or her legal representative from consulting with state wit-nesses without the permission of the prosecuting authority. Such a rule was, said the court, unconsti-tutional, since it rested on two

untenable propositions: first, that there could never be circum-stances in which the right to a fair trial would justify such a consulta-tion; and, secondly, that, because the prosecution had interviewed a witness first, it then acquired some kind of proprietary right in that witness.

Whether the accused has a right to consult a state witness depends, once again, on the ex-ercise of a proper discretion by the court, on a balance of com-peting interests and the dictates of a fair trial. But a state witness cannot be compelled to be inter-viewed against his will.

t s h

Bsp Seminars ®

Now touring…

Tax dimensions of borrowing & lending

Tax dimensions of property leases

—movable & immovable

Two-day tax retreat: A full-on PAYE course

How to register Seminar manager: Lesley Byrne. E-mail address: [email protected]



Documents

‘Bsp On Track To Meet 5 m Job-target By 2014’ · ‘Bsp On Track To Meet 5 m Job-target By 2014’ —A promise we make (80 TSH 2009) is a promise we keep on making. ... It is